Housing starts dropped 6% in January according to data released on Thursday. Analysts at Wells Fargo point out all the drop was in single-family starts, which is also where much of the recent strength has been. They point out there is little reason to worry about January’s drop.
Key Quotes:
“January’s six percent drop in housing starts looks to be nothing more than some payback for the exceptionally strong numbers put up toward the end of 2020. Home building remains one of the strongest parts of the economy, with overall starts remaining 14.5% above their 2020 totals, even after January’s 6% drop. More succinctly, if housing starts were to remain at January’s level for the entire year, housing starts would rise 14.5%. By comparison housing starts rose 7.0% in 2020, with preliminary numbers showing overall starts at 1.38 million.”
“The strength in building permits means home building is likely to strengthen further, although we may see some near-term weakness in February due to the harsh weather hitting Texas and parts of the South. Texas accounted for 15.2% of all housing permits in 2020 and 15.7% of single-family permits.”
“Home builders are clearly feeling upbeat. The National Association of Home Builders/Wells Fargo housing market index rose one point in February to 84, which is roughly in line with its average for the past six months. Prospective buyer traffic picked back up in February, although builders are slightly less optimistic about future sales.”
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